What happened Tuesday

A review of things you need to know before you go home on Tuesday; BNZ & TSB cut td/savings accounts, inflation expectations stable, IRD ready for online GST, swap rates rise, NZD rises

17th May 16, 4:00pm by David Chaston

Here are the key things you need to know before you leave work today.

TODAY'S MORTGAGE RATE CHANGES
The Co-operative Bank cut its 18 month rate by 16 basis points to 4.19%. SBS Bank introduced 18 month and two year "specials" with both at 4.15%.

TODAY'S DEPOSIT RATE CHANGES
BNZ tweaked its TD rates for terms 18 months to five years, all down by minor ( -5 bps or so) amounts. TSB Bank cuts its websaver account rate by -10 bps to 2.10%.

NOT RISING OR FALLING
Today's RBNZ survey of inflation expectations will disappoint those looking to find a coming rise (people like me). But those looking for a further fall won't have found anything either. The 2 year expectation is virtually unchanged among those consumers surveyed at 1.64%.

DIPPING IN
The scale of the raid on KwiSaver balances for first home buyer deposits has been reported on before from official data. But ANZ today released data of its own withdrawal experience. These were up +188% in 2015 from 2014. 8,000 of their clients took out an average of $18,360 each. Of course, ANZ wins either way. But to my way of thinking, this FHB withdrawal option compromises the base principle of the whole program - unless you think housing is an 'investment' rather than accommodation (which most Kiwis seem to think these days).

FALLING BIRTH RATE AGAIN
The small rise in the birth rate we saw in 2015 is now over. The birth rate in the March quarter was just under 13.1 per 1000 population. That is still above the 12.7 rate in the same quarter a year ago, but the rise and rise is now over with a fall-back from the December 13.3 rate. The death rate continues to be stable, and is still at 6.9.

SHIFTING TASTE
Sales of new motor cars in Australia fell in April, reversing from March gains, according to data from the Australian Bureau of Statistics. Car sales are down -3.2% in the year to April compared with the same period last year. But SUV sales show a completely different trend. They are up almost +15% in the same comparative.

CLAMPING DOWN ON AVOIDANCE
The IRD today published an advance note on the upcoming application of GST to offshore online sales. After October 1, GST will apply to all consumption that occurs within New Zealand. Insurance and betting will be covered along with all 'remote services'.

NO MORE ?
The minutes of the last RBA meeting suggests that their last rate cut may have been intended to be a one-off. Some board members can't see any point in low rates. The AUD rose on the release.

SWAP RATES RISE
Wholesale interest swap rates took their cues from Wall Street today, rising in a faint steepening trend. The terms 1 to 3 years rose +2 bps, 4 years rose by +3 bps, and 5 to 10 years rose by +5 bps. NZ swap rates are here. The 90-day bank bill rate also rose, by +1 bp to 2.35%.

NZ DOLLAR RISES
Our currency rose by half a cent today until 3pm when the inflation expectation survey data was out. That can move markets. But today's unchanged survey result saw the NZD hold on to those gains. The Kiwi dollar is now at 68.1 USc, up to 92.7 AUc, and 60.2 euro cents. The TWI-5 is now at 71.6. Check our real-time charts here.

You can now see an animation of this chart. Click on it, or click here.

Daily exchange rates

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Source: RBNZ

Source: CoinDesk

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28 Comments

by sharetrader | 17th May 16, 4:58pm 1463461128

interesting from the RBA, so after watching the problems caused by ZIRP or NIRP they have said no we wont go there it does not work and inflates asset bubbles which later on lead to bigger problems.
pity those screaming for cheaper rates here can not see the same

by Justice | 17th May 16, 5:28pm 1463462926

So...why are they not doing the opposite to have the opposite effect then ST which would be a good way of moving investment away from borrowing and back to saving for example?

They are basically admitting they will set the OCR at whatever they want regardless of actual CPI figures, which is in breach of their targeting set by government, which they are already well outside ofcourse.

Is that also further proof we have a very fragile economy built around nothing but a property binge bubble?

I really don't think the RBNZ have any choice IF things continue to deteriorate do they?

by Stephen Hulme | 17th May 16, 5:35pm 1463463358

I really don't think the RBNZ have any choice IF things continue to deteriorate do they?

Do you mean the way we project ourselves to the outside world? Foreign wholesale lenders might up the cost of lending again?

Hundreds of families in Auckland are living in cars, garages and even a shipping container as a housing crisis fuelled by rising property prices forces low-income workers out of private rental accommodation. Read more

by Justice | 17th May 16, 5:55pm 1463464540

I think the RBNZ will do what the US FED tells them to do. Why else met with them every 3 months or what ever it is they do.

by David Chaston | 17th May 16, 6:53pm 1463468037

Conspiracy rubbish. No facts.

by Justice | 17th May 16, 7:42pm 1463470975

Umm, actually its not David. The RBNZ do meet with the US FED. In fact ALL the governors of RB's meet on a regular basis in Washington DC.

ASK them!

How do you think they arrange 'credit default swaps' and such like? Via text message?

We are part of that world:

The global outlook has deteriorated “due to weaker growth in China and other emerging markets, and slower growth in Europe,” Wheeler said Thursday in Wellington. “Further policy easing may be required to ensure that future average inflation settles near the middle of the target range.”

by Ralph | 17th May 16, 7:42pm 1463470948

LOL, but a meeting does not a slave make.

by Justice | 17th May 16, 7:44pm 1463471061

Really? Depends on who is borrowing from whom. They don't borrow from us Ralph. We 'take', they give.

by Andrewj | 17th May 16, 5:53pm 1463464406

Falling interest rates destroy capital because the interest rates and capital values move in opposite directions.
If the interest rates falls, then the bond price goes up, if the interest rate goes up then the bond price goes
down. So if interest rates go to zero, then the bond price goes up. But how far can it go up? Can it go to
infinity? Well, that's clearly a contradiction.
Negative interest rates, first of all it has never happened in history that worldwide interest rates became
negative, but it's very destructive as far as the integrity of capital is concerned.

GB: Is it a currency war?

P: Yes, that's right. A currency war and more importantly, a trade war. Countries think that by cheapening their
own currency, they're boosting exports. They are beggaring their neighbors. But it is going to backfire, in a bad
way, while they think that cheapening their national currency is a valid way to create jobs and boost exports.
GB:Is that true?
P: No, no, no. This has been refuted thousands of times over the centuries. This was the idea of mercantilism,
and it never worked. It always backfired. A country cannot get richer by cheapening its currency because that
means destroying the value of the savings of the people; including companies, individuals, pensioners and so
on and so forth. So, you cannot create wealth by destroying the value of your currency. That is the reason why
they try to do that, including the Swiss. They want to keep exports at an artificially high level, even if this means
making people at large poorer. It is similar to a champion trying to become more competitive at the race
through selfmutilation
http://www.professorfekete.com/articles/AEFProfFeketeInterviewWithGuill…

by Stephen L | 17th May 16, 7:04pm 1463468644

One of Fekete's arguments does not remotely stack up with the evidence.
He says "you cannot create wealth by destroying the value of your currency. That is the reason why
they try to do that, including the Swiss."
It seems to me the Swiss have partly wanted to keep their currency competitive, and partly have taken advantage of the opportunity to buy up massive amounts of the world's wealth.
The evidence is as follows:
In 2008 the Swiss Franc was worth USD0.954 and is now worth USD $1.03. The Swiss Franc has appreciated despite their massive printing.
In the same time their Foreign Reserves have gone from 100 billion to 600 billion through government printing and buying of foreign assets.
Their M3 has increased by a further 300 billion, or ~50% in the same time.
In the meantime their industries have been kept competitive.
While we can't know what their exchange rate would be if they had not printed, it seems reasonable from the above to conclude that roughly they have printed themselves to a free lot of US$ 500 billion to $800 billion of world assets.
http://www.tradingeconomics.com/switzerland/foreign-exchange-reserves.

by Andrewj | 17th May 16, 7:29pm 1463470174

http://www.wsj.com/articles/switzerland-offers-counterpoint-on-deflatio…

by Ralph | 17th May 16, 7:33pm 1463470398

He does suggest the bonds purchased on that $600B balance sheet will perhaps not be worth the paper they are printed on.

And to measure "value" of a FIAT currency by its depreciation/appreciation against another FIAT currency is to confuse currency with wealth.

by Ralph | 17th May 16, 7:23pm 1463469814

One of the problems with these wide ranging interviews is the lack of defined terms.

It's easy to lose subtly of meaning when words like capital, wealth and money are used freely and sometimes interchangeably. Introducing gold, which could mean any one of those things in a particular context doesn't help either.

Another problem is the lack of time qualification. Perhaps in the long term or in absolute terms mercantilism always backfires but it is not true to infer no one ever made money doing it (for at least a season).

by KH | 18th May 16, 3:57am 1463500627

Aj. Think about China.

by James007 | 17th May 16, 8:45pm 1463474744

Still really dry for May - look at the east coast! If they don't get rain, next year could be bad without irrigation.

by Boatman | 17th May 16, 9:04pm 1463475881

David , I see that crude oil has just gone over $48 pbl in the past hour .

by xelnaga | 18th May 16, 12:12am 1463487177

New Zealand seems to make the international news for all the wrong reasons these days. Dodgy tax laws and minimum wage squalor.

Are you trying to be a global city or global joke?

http://www.theguardian.com/world/2016/may/17/new-zealand-housing-crisis…

by ObeseBallerina | 18th May 16, 12:28am 1463488086

I think you are being a little dramatic and the guardian is too (commie rag that it is). NZ is the 4th least corrupt country in the world http://www.transparency.org/cpi2015#results-table. Thats pretty good! I saw a video last night about how a lady with 5 kids, youngest one is 5 weeks old living in a 2 bed flat. The question has to be asked. Why is she still having kids? If you can't feed em don't breed em. People living in sheds or garages is far from ideal but neither is building thousands of houses for people who take handouts.

by xelnaga | 18th May 16, 12:59am 1463489962

I don't think so. New Zealand was "perceived" as the 4th least corrupt country in the world. That was good, but that reputation is being eroded. The truth is getting out.

I don't know the circumstances of particular individuals, but many of these people wouldn't be in such a dire situation if it wasn't for bad policymaking by the current government. To blame the people is premature.

by ObeseBallerina | 18th May 16, 2:26am 1463495187

I think the "bad policy" can be laid at the door of the ARC and NIMBYs they are scared of. Im taking these numbers with a grain of salt too. $400 a week for a garage? I charge my tenants $550 for a 3 bed house on 1/4 acre on the shore!

by xelnaga | 18th May 16, 3:32am 1463499150

Sure. But also central government.

by Zachary Smith | 18th May 16, 6:44am 1463510653

Yeah that $400 for a garage story sounds like something somebody just made up. I rent out a beautiful home in Te Atatu Sth with internal access garage, own driveway and private fenced section for $380 a week.
Contrary to popular opinion I am a nice person whose last tenants remarked that I was the best landlord ever.
The problem in South Auckland may be one of a lack of trust within and between the demographic groups. People should actually work on building up trust. Picking up rubbish in the neighborhood would be a good start. My block has very little rubbish. You know why? Because I walk around and pick it all up! Do you think people observing me would think I can trust that guy?

by xelnaga | 18th May 16, 7:23am 1463513020

Is that a reflection on you being really good, or landlords in general being really bad :)

by Su30 | 18th May 16, 7:17am 1463512649

Made up stories you say? Try this then - http://m.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=11640259

Given the size of AKL city you could get an example of pretty much anything you want but they still couldn't get it right!. Media has been reporting or trying to report exceptions rather than the norms.

by Zachary Smith | 18th May 16, 7:31am 1463513493

Hilarious! They should do stories about people renovating and gentrifying instead. Bunch of losers! Geez I'm sick of it and it is time to fight back.

by sharetrader | 18th May 16, 7:53am 1463514812

you can walk down my street and see five garages converted to sleepouts being rented out. this has been going on for years out south Auckland way its not a new thing.
how useless are they that can not find an actual overcrowded house

by Su30 | 18th May 16, 7:18am 1463512713

double post syndrome

by xelnaga | 18th May 16, 7:32am 1463513577

FYI. The save button should be disabled in the browser immediately after clicking to prevent it being pressed repeatedly when the server is slow responding to the http post and the user thinks nothing is happening. This is why double posts keep occurring.

I have made a chrome plugin to fix the issue in the interim.

https://chrome.google.com/webstore/detail/interestconz-enhancements/ljp…